Saeki, Y., & Horak, S. (2014). Trust and the cultivation of relation-specific skills. Evidence from a multinational automotive supplier in Japan and Germany. Management Decision, 52(8), 1433-1450. DOI: https://doi.org/10.1108/MD-09-2013-0460

Trust and the cultivation of relation-specific skills

Evidence from a multinational automotive supplier in Japan and

Germany

Yasuo Saeki & Sven Horak

Purpose - This study draws on Asanuma’s concept of relation-specific skills in order to

analyse collaboration between automaker and supplier. The cultivation of relation-specific

skills has been widely regarded a key factor of competitiveness in the Japanese automotive

industry. Yet, the concept has been described mostly in economic terms only. This research

attempts to extend this view by analysing the role of informal institutions (trust) in developing

relation-specific skills.

Design/ methodology/ approach - By drawing on expert interview data, evaluated by using

content analysis, within the frame of a case study research approach, we gathered data from

the leading multinational automotive supplier Bosch in its facilities in Japan and Germany.

Findings - The results show that the influence of trust plays a role in determining relation-

specific skills. In conclusion, we assume that cultural homophily positively influences the

cultivation of relation-specific skills and recommend future research to take this assumption

into account.

Practical implications – Findings imply that over the course of business transactions

organizational structures hardly converge leading to higher transaction cost. Moreover,

Keiretsu structures are still strong in the field of automotive electronics.

Originality – So far the concept of relation-specific skills has been regarded a “culture-free”

concept. Our results provide a first indication that cultural differences affect the cultivation of

relation-specific skill, and thus need to be considered integral to the concept.

Keywords: Banri Asanuma, relation-specific skills, cultural homophily, trust, automotive

industry, supplier-maker relation.

Version January 2013 An identical version has been accepted for Management Decision Copyright © 2013 Saeki, Horak All rights reserved.

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Introduction

In Japan, automaker and suppliers are commonly described to have a vertical hierarchical

relationship towards each other, contrary to their US or European peers that’s relationship is

rather horizontally structured, in nature rather formal, competitive, contract-based and largely

heterarchic. Albeit a vertical hierarchical structure in Japan evolved, information flows more

freely between actors and informal, personal ties are fostered through informal gatherings

(Jap.: Kyoryoku-kai). Characteristically, the relationship is based on long-term commitment,

cooperation, trust and mutual support (Clark and Fujimoto, 1992). Research has found out

that the vertical type of supplier integration pursued in Japan has several advantages, e.g. it

resulted in higher product quality, higher productivity and shorter development cycles (Clark

and Fujimoto, 1992; Kotabe et al., 2003). The Japanese approach was soon regarded more

advanced and gave impetus for questioning the horizontal approach pursued in the West.

The research by Banri Asanuma (1985a, 1985b, 1989, 1992) has contributed largely to

a better understanding of the underlying factors determining the Japanese collaborative

business system. In his work, Asanuma describes the coordination mechanisms between

Japanese automaker and their supplier, by focusing on the relationship, a rather soft factor,

between both. During the course of reoccurring transactions between maker and supplier,

Asanuma found out that suppliers have accumulated specific skills that he defines as

“relation-specific skill”. This is enabled due to a special organizational model pursued by

Japanese auto maker. They have organised both competition and learning for their suppliers.

The automakers not only make the suppliers compete among each other in order to improve

cost and product quality, but also trigger learning initiatives on how to improve

manufacturing processes continuously through the long-term commitments to transactions.

Given that the competitiveness of the Japanese automotive industry is based on the

approaches described above, multinational suppliers face the challenge of adjusting to the

Japanese model in order to conduct business successfully and gain or maintain a foothold in

the market. Next to the widely researched Keiretsu structure that often represents an

impediment to business expansion to foreign suppliers (comprehensively studied by, e.g.

Berglöf and Perotti, 1994; Dow et al., 2009; McGuire and Dow, 2008), research has to a

lesser extent investigated the influence of informal institutions and their social embeddedness

that may represent a barrier to establishing relation-specific skills. The purpose of this study is

to investigate how a foreign multinational supplier manages its supply-chain system to cater

to Japanese customers by focusing on informal institutions, in particular, on trust, which is

considered important for cultivating relation-specific skills.

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We chose to study the Bosch Group, a multinational engineering and electronics firm

and the largest automotive supplier worldwide, based on global automotive parts sales (in

2012) to automobile maker (Automotive News, 2013). The Robert Bosch GmbH was founded

by Robert Bosch in 1886 in Stuttgart, Germany. Today, still a company with limited liability

(GmbH), Bosch employs approximately 306 000 people worldwide. Since 1911 Bosch is

present in Japan and strengthened its position in the Japanese automotive market through

mergers and acquisitions. Japan is one of the largest markets for automobiles worldwide and

home of industry leaders such as Toyota, Nissan or Honda. By end of 2012, the automotive

division (Bosch Corporation) employed 6 774 people (consolidated) in Japan in the field of

research and development, production and sales of automotive systems and components. Next

to Bosch’s strategy of being an innovator and technology leader (4.8 billion Euro in research

and development spending in 2012 and ca. 4 800 patent applications worldwide) a strategic

advantage in the supplier sector is the firm’s global manufacturing footprint, enabling them to

serve automobile makers out of their local production locations in respective countries for

global automobile projects.

In what follows, first, the theoretical framework is presented and the literature

reviewed. Based on this, propositions are derived that are tested in the frame of a case study

approach using the example of the Bosch Group. Data were gathered through interviews with

Japanese and German managers of the firm in several of the firms facilities in Germany and

Japan. The final section presents the results and outlines the contribution of the study to the

theoretical advancement of inter-organisational studies and the concept of relation-specific

skills.

Theoretical background

Relation-specific skills

The role of suppliers in Japan is defined by Asanuma (1989) according to the degree of

initiative in design of the product and the process (table 1). He classified manufactured auto

components (and suppliers) into “marketed goods (VII)”, that are standardised parts that do

not require any modification for the customer, and “ordered goods (I to VI)”.

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Insert table 1 here

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The “ordered goods” were procured by the method of “drawings supplied” (DS-parts, I

to III) and “drawings approved” (DA-parts, IV to VI). DS-parts are parts manufactured by

outside suppliers according to the drawings supplied by the core firm. DA-parts are parts

manufactured by outside suppliers based on the drawings made by the respective suppliers

themselves and approved by the core firm (Asanuma, 1989).

Asanuma’s classification shown in table 1 considers implicitly a second dimension in

addition. Namely, it can also be understood in terms of the competence level of a supplier’s

technological skills. The classification should not be understood a static construct, rather more

Asanuma underlines that suppliers have opportunities to move up the classes. Mainly, DS-

parts suppliers have been promoted to DA-parts supplier status. As a result, many suppliers in

the Japanese auto industry (approximately 80%) are now classified as DA-parts suppliers

(Fujimoto, 1999). The promotion requires great effort and takes quite a long time for suppliers.

A precondition is seen in the suppliers’ ability to establish trust with the automaker.

By drawing on Williamson’s (1979) classification of transactions and Aoki’s (1988)

work on relational quasi-rent, Asanuma proposes that the relation-specific skills in the

Japanese auto industry have a quasi-rent. Transaction and coordination cost can be reduced

once the relationship between maker and supplier leads to the establishment of relation-

specific skills. Moreover, it helps improving the quality of cooperation. Developing relation

specific skills requires long-term efforts for both parties involved. Open communication is a

precondition, as well as the willingness to learn mutually. Inequality in power need to be

considered and parties are required to take over appropriate positions within a hierarchy either

as a superior or inferior and show corresponding behaviour. In fact the ability to adopt to

informal ethical rules is a key factor working towards the development of trust and, over time,

the establishment of relation-specific skills. These cultural factors of influence have so far

been no integral part of Asanuma’s explanation, which describes the development of relation-

specific skills in economic terms only. In his opinion, culture does not play a role in the

acquisition of relation-specific skills. Testing this assumption in a mono-cultural field

environment is difficult, due to the absence of a test group to compare results with.

One way to solve this challenge is to consider the example of a multinational firm that is

catering to Japanese and non-Japanese customers. Internationally exposed firms are in the best

position to compare relational differences between customers from other countries.

Given that the development of relation-specific skills results in a win-win situation for

maker and supplier that is established purely on economic terms, cultural differences should

not influence the development of trust in order to benefit from relation-specific skills.

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Trust and cooperation

What is trust and why is it important in business transactions? Gambetta defines trust as “a

particular level of the subjective probability with which an agent assesses that another agent

or group of agents will perform a particular action, both before he can monitor such action (or

independently of his capacity ever to be able to monitor it) and in a context in which it affects

his own action” (Gambetta, 2000: 218). Fukuyama stresses the embeddednes of trust: “Trust

is the expectation that arises within a community of regular, honest, and cooperative

behaviour, based on commonly shared norms, on the part of other members of that

community” (Fukuyama, 1995: 26). Recently, experimental economics did provide empirical

findings on different shades of trust, investigating its nature and influence under different

conditions (e. g. Barr and Serra, 2010; Buchan and Croson, 2004; Buchan et al., 2006;

Cameron et al., 2009; Carpenter et al., 2004). On the basis of experimental studies, “mutual

trust”, it can be summarised, “is the key to actual cooperation” (Yamagishi, 1986: 11). The

working definition applied in this paper relates foremost to the idea Fukuyama had in mind

who underlines that trust emerges from expectations of a (good) outcome from cooperative

behaviour based on shared community norms.

Culture, trust and organisational procedures in maker-supplier relations

Cross-cultural research in business interactions with Japan is a relatively established field of

research. In more detail, two camps can be distinguised according to their view on the

influence of culture in maker-supplier relationships. One camp, the ‚culturalists‘, who believe

culture plays a role and the other camp, the ‚rationalists‘, who believe culture is irrelevant in

business transactions. The culturalists (e.g. Herron and Hicks, 2008; Hines et al., 2004 or

Cousins and Stanwix, 2001) regard factors such as values, work ethics and norms of

behaviour key when it comes for instance to implementing original Japanese management

styles into a foreign environment. This is the case, e.g. when Japanese plants abroad adopt

Kaizen management systems or the Toyota Production System (TPS). It is reported that initial

attempts often fail due to a different cultural environment. The rationalists (e.g. Dyer, 2000;

Lamming, 1994; McMillan, 1990), on the other hand, focus rather on procedural matters

while their social embeddedness and institutional environment they derive their innovative

spirit from are not considered to be of high significance (Aoki 2001; David, 2007; Nelson,

2008; Nelson and Sampat, 2001; Streeck and Thelen, 2005).

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Research suggests that the high degree of trust and cooperation between maker and supplier is

a key point for efficient supply chain management in Japan (Dyer and Chu, 2006; Hagen and

Choe, 1998; Sako and Helper, 1998). This leads to the following proposition:

Proposition 1. In a supply chain trust becomes an important factor for efficient collaboration.

Putnam (1993) emphasises the influence of norms of reciprocity on the willingness to

cooperate voluntarily. Reciprocity in the form of frequent social exchange results over time in

the emergence of trust and the establishment of social capital. Moreover, it curtails

opportunistic behaviour. Building a positive social relationship thus presupposes a regular and

reciprocal exchange.

For Ostrom and Ahn (2003), reciprocity is an internalised personal standard as well as

a social exchange process. The decision for a reciprocal action is therefore significantly

influenced by the reliability of the actors involved.

Transferring what has been said above to a supply chain leads to the following

proposition:

Proposition 2. Due to norms of reciprocity interpersonal relationships deepen over time

resulting in a higher level of trust between persons.

Mac Duffie and Helper (2005) underline the lack of trust in the American automotive

industry. Dyer and Chu's (2000) findings also imply a low level of trust between buyer and

supplier in the US, whereas in Japan the trust level is universally high. In sum, a low degree

of trust hinders communication and information sharing or a lack of trust acts against supply

chain integration (Forslund and Jonsson, 2009). Characteristically, low-trust cultures, rely

more on a contract (contract-based cultures) in business transactions, whereas Eastern

cultures, place to a great extend importance on personal relationships (relation-based cultures)

(Pearce and Robinson, 2000; Yi and Ellis, 2000). The supply chain integration and

performance management literature assumes that processes in a firm (e.g. logistics, ordering

systems, release procedures, etc.) converge over time between firms in a supply chain so that

both firms benefit of higher performance through more efficient procedures (Holmberg, 2000;

Tsang, 2007; Herron and Hicks, 2008). As procedure are to some extend influenced by the

corporate culture of a firm, therewith by the culture in which a firm operates, it can be

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assumed that procedures of collaborating firms from different cultures may not fully

converge. This indicates the following:

Proposition 3. Procedural differences may not converge between collaborating firms of

contract-based and relation-based cultures.

Does modularisation affect relation-specific skills?

In the automotive industry the development towards modularisation can be considered one of

the major trends of the last decades. By definition, modularisation “is a procedure that uses

knowledge of design structure and design parameter interdependence to create design rules.

The design rules support an efficient and flexible task structure, in which ‘parts’ of the design

are worked on independently and parallel with one another” (Baldwin and Clark, 2000, p. 52).

According to Takeishi and Fujimoto (2005), modularisation affects the product, production

and the inter-firm systems. Changes in the inter-firm system could lead to changes in product

architecture and vice-versa. Hence, both have an influence on each other in two directions. It

is further argued that modularisation in product architecture might change in some cases the

division of labour. Outsourcing, as part of modularization, aiming towards higher efficiency

in car production, has been observed a strong trend in Europe. Among others, outsourcing

depends to a large extend on trust, as critical tasks are performed by sub-suppliers that were

formerly done in-house. The trend towards modularization in Japan, in contrast, left lower tier

suppliers who played a role within the Keirestu structure, fall behind but large supplier

became more influential and powerful (Schaede, 2010).

Whether the trend to modularization has an effect on the creation of relation-specific

skills has not been researched by scholars so far as far as we are aware. While modularization

has an influence of the supply chain structure as outlined above, it possibly causes an effect

on the relationship between supplier and automaker. We have included this question in our

questionnaire in order to explore a possible influence but we refrain from putting forward a

proposition that may stand on vague grounds in the absence of a literature base.

Method and data collection

Interview partner selection and sector-specific characteristics

In order to investigate the propositions raised in the prior section, we interviewed eight

managers of the Bosch group in two countries and five different locations. A judgment

sampling strategy was applied for the selection of the interview partner (Marshall 1996a;

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Miles and Huberman 1994) in combination with key informant technique (Marshall 1996b;

Tremblay 1989), according to which an ideal interview partner must a) occupy the appropriate

position that exposes him or her to the information in demand, b) and be knowledgeable, c)

willing, d) able to communicate openly and e) unbiased and objective (Tremblay, 1989).

Following these criteria, four managers of Bosch Germany (German nationals) were selected

and four belonging to Bosch Japan (Japanese nationals, table 2). The interviews took place at

several locations of Bosch in Germany as well as in Japan. They were conducted with single

persons and in groups for a duration of approximately 80–110 minutes respectively. The

managers represent functions such as marketing, project management, key account

management (sales), strategic sales planning and engineering.

In reference to Asanuma’s classification (table 1), this research focuses on a DA-parts

supplier, category VI. We selected an international supplier from this category because it is

the last on Asanuma’s part and competence classification (only followed by “marketed

goods” suppliers that do have the lowest degree of interaction with the automaker). I.e.

selecting a DA-parts VI supplier means selecting a supplier with a high grade of interaction

with and a high importance to the automaker.

All interviewees had experience in the automotive industry of 10 years or more. The

German managers especially had extensive experience with working in Germany and Japan

for several years. They are multilingual (German, Japanese and English) and familiar with

both cultural environments.

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Insert table 2 here

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Research question formulation

The questions asked the interview partner encompassed three dimensional categories, which

we classified as a) business relationship characteristics, b) relational development and

modularisation and c) procedural and cultural differences. The first category includes

questions in relation to the typology of parts used as classified by Asanuma (1985a, 1985b),

transaction-specific questions in relation to business initialisation and duration and either a

hierarchical or network-like relationship between maker and supplier. The second category

focuses on relational developments over time between maker and supplier, including a

perceived trend towards modularisation requirements by vehicle makers. These questions

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were answered in relation to the questions of the previous category. The third category

investigates procedural and cultural differences (table 3).

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Insert table 3 here

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Evaluation

Transcriptions that were prepared based on the interviews conducted were evaluated using

content analysis (Miles and Huberman 1994; Mayring, 2008). The advantage of this method

lies in its analytical procedure. It contains pre-defined interpretation steps that are in the

course of the analysis finally generalised, which enables traceability and makes the result

inter-subjectively verifiable. The principal component of this approach is the paraphrasing

and generalisation of the material out of which the essentially reduced statement is generated.

We used rather descriptive than abstract codes. In the course of the interviews, codes were

refined, added or deleted if proven redundant or not suitable to the character of the data. We

used the same pre-conceptualizations for data evaluation, as applied in the interview

instrument. Second and third order themes, where suitable, were derived from the data,

followed by generalizations made finally. We conducted post-interview member checks with

two interview partners from each country respectively, in order to confirm the accuracy of

interpretations and generalizations of the data (Wilhelm, 2011).

In the following, the results of the survey are presented and summarised in table 5 at the end

of this section.

Business relationship characteristics

Major product-type: In Europe and Japan Type A parts prevail (i.e. DA-parts) in the

division of the firm. By definition, these are drawings-approved parts that are manufactured

by the supplier according to the drawings made by the supplier and approved by the maker.

The supplier usually provides the contract specification that includes the drawing the maker is

asked to approve. Until the quotation is submitted, technical and commercial negotiations take

place.

Business transaction initialisation and duration: In Japan and in Germany early

customer contacts are important especially where innovative products are concerned.

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Depending on product, platform size and automaker strategy, all three major forms (i.e.

bidding, nomination by the maker and R&D competition) can be found. Whereas in the case

of innovative products R&D competition is in most cases conducted, online bidding has

become popular. For commodity products price and quality are the most important factors,

hence bidding is the major mode of sourcing. High volume platforms are usually sourced by

bidding too.

For foreign suppliers in Japan the Keiretsu system is a hurdle to negotiate for market

access. Our interview partner confirm that most of the market share is occupied by Keiretsu

suppliers. The remaining share on the domestic market is very small.

Maker-supplier relationship: There are differences in Europe and in Japan. In Europe,

it is usually a soft-hierarchical relationship in which experts on the supplier and customer side

usually talk with each other at eye-level. But there are network tendencies too, for example,

standardisation initiatives are often coordinated in a network or some suppliers, e.g. Bosch,

sell their own produced parts to competitors. Contrary to the Keiretsu structure, German

suppliers prefer to spread business risks by customer portfolio diversification. Therefore,

suppliers have to be competent to handle different requests and specifications by several

automakers. The Japanese interview partner underline that two levels are to be distinguished

important in describing the maker-supplier relationship: the company level and the personal

level. On a company level, compared with Europe, the hierarchy between the automaker and

the supplier is much steeper and more rigid. This is enforced by the automaker and generally

accepted. Japanese automakers have therefore more power to steer the supplier. On a personal

level, establishing person-depending trust is key. Japanese engineers of the automaker are

usually hesitant to accept supplier engineers’ proposals if no personal trust-base exists. Only

after several years of trustful relationship building does access become easier. If there is no

trust, many details are required that make things precede very slowly.

Relational development and modularisation

Relational development: In this section we asked the interview partner about the

development of the relationship over time relating to the items questioned in the previous

section. We observed a different perception of the interview partner from Germany and Japan.

The German interview partner could not perceive a difference or change in quality of the

relationship with the German and European customers over time. In contrast to the German

interview partner, the Japanese interview partner often used the term “friendship” or

“friendship-like relationship” during the interviews in order to better explain the nature of the

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relationship. This component, a rather sentimental and emotional feature of a relationship,

was not mentioned among the German interview partner, who believe that personal

relationships are not too important or more influential than the hard facts, such as

technological competence, quality and process competence. The interview partner from Japan

clearly observe that over time the relationship quality towards the automaker improves

causing e.g. an increase in the bargaining power of the supplier. Reasons given to explain this

development are the establishment of trust and good performance over time. The Japanese

and German interview partner concluded that the role of developing interpersonal trust is an

important difference in inter-firm collaboration in Japan with important implications.

Anecdotes were given by the interview partner in order to describe these implications in more

detail (table 4).

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Insert table 4 here

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Modularisation versus cherry picking: The trend towards modularisation could not be

confirmed among the interview partner in relation to their products (electronics). In general,

the experts observe a tendency to change from the system approach to single component

sourcing. Only a few Japanese automakers still prefer system sourcing over component

sourcing. In sum, the interview partner mention that single component sourcing has always

been the major mode of purchasing in this specific field. Hence, relations between automaker

and supplier are not affected by the product design in this field.

Though we have not formulated an explicit research proposition on this subject due to

concerns outlined above, we believe our findings are interesting as the trend towards

modularization appears to exclude critical electronical parts. Hence, broadly formulated

conclusions on modularization and its implications for the automotive industry may easily run

into risk of being imprecise and one-sided as the modularization trend may not be generalized

over all product categories in the automotive industry.

Procedural and cultural differences

Differences during the project acquisition and R&D phase: Japanese automakers are

perceived to have high information and communication needs. This increases the transaction

costs in relation to the communication efforts of the supplier. In contrast, Western automakers

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rely more on contractually agreed terms and technical specifications. Moreover, Japanese

automakers rely to a much lesser extent on international standards (e.g. ISO). This again

results in higher communication costs for clarifying specifications. There are many time

intensive activities required before an official business relationship starts. On the whole,

Japanese automakers try to solve issues before they take place. Usually, problem-solving

activities start after a project is awarded, i.e. after the contract is signed, and at the time they

take place. A supplier has to invest many resources before a contract is signed and an official

business relationship can start.

Moreover, the Keiretsu system is still viewed as exclusive for foreign suppliers and a

major barrier to gaining acceptance on the Japanese market. In the Japanese automotive

component market the potential market share of foreign suppliers is considered small.

However, as regards markets outside of Japan it is different. Such markets are rather attractive

for foreign suppliers, especially for those in possession of global production and R&D

facilities as only a few suppliers can offer a global network to cater to local markets.

Individual and organisation cultural differences: Both, Japanese and German

organisations are hierarchy conscious, but hierarchy in Japan is much steeper. The Japanese

management style is more focused on hierarchy-oriented group consensus, while German

management style promotes different individual opinions, creative problem solving and

equality. Communication ways are different and lead to inefficiencies. In Germany,

interdisciplinary functions, such as the project manager who has commercial as well as

engineering related responsibilities, are considered important for the steering of the project. In

Japan sales representatives are used to talking to purchasing representatives and engineers to

engineers. Hence, functions are more separated, which again leads to higher transaction costs.

Moreover, the interview results also show that the supplier internal communication

between the headquarter and facilities abroad is challenging. We learned that Japanese

automakers do face a similar problem, but some seem to overcome this hurdle by establishing

a “dual management structure”, i.e. positions abroad are double-staffed featuring one

Japanese national who reports to the Japanese headquarter and a local person managing

mostly domestic affairs. It can be assumed that procedural, or even culture-related differences,

lead to higher transaction cost. However, more research needs to be done to analyse this

observation further. All experts interviewed regret that often improvement proposals from the

suppliers to Japanese automakers are not really appreciated. The Japanese interview partner

believe that accepting improvement proposals is influenced by the relationship quality, i.e. the

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degree of trust. The more trust is established over time, the more improvement proposals are

considered an option for the automaker.

The following table provides a summary of the most remarkable dissonances of perceptions

among the managers interviewed along the major themes maker-supplier relationship,

personal relationship, procedures and organization.

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Insert table 5 here

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Summary

We show in our case study that a different appreciation towards the value of trust in business

relations exists, which may cause an increase in transaction complexity, instead of a decrease.

Both groups of interview partner appreciate trust but it is differently pronounced. In that

regard, the persistence of a steeper hierarchy between maker and supplier makes it more

difficult for the supplier to enforce improvement proposals on the maker. Whereas the latter is

the typical perception mentioned by the German interview partner, the Japanese interview

partner clearly perceive that an increase in trust over time led to better and more efficient

inter-firm collaboration. Due to the different perceptions of the Japanese and German

interview partner, proposition 1 cannot be answered clearly. Whereas in Japan trust is key to

supplier-maker collaboration, it plays in Germany a secondary role.

In that connection, hierarchical group consensus, predominant in Japan, causes for a

firm originated in a culture that values individual achievement and self-fulfillment delays in

decision-making and discouragement, e.g. when improvement proposals remain unheard. On

an interpersonal level, again, the German interview partner does not perceive a business

relationship featuring reciprocal social actions over time to develop into a rather deeper

personalised direction or friendship. More important appears to be maintaining professional

behaviour. The Japanese interview partner, in comparison, clearly sees a deepening of trust

levels and reciprocal interpersonal actions as leading over time to an increase in trust and a

closer relationship. The ability to develop a trustful friendship-like personal relationship can

be regarded as a professional skill necessary to perform a job successfully. Again, due to the

different perceptions of the Japanese and German interview partner, proposition 2 cannot be

answered clearly. Though the Japanese and German interview partner both appreciate trust in

social transactions, the pronunciation greatly differs. Contrary to the Japanese interview

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partner, for the German interview partner the ability to establish trust and friendship appears

to be less relevant as a professional skill. With this finding, we believe we have identified an

underlying key factor to establish relation-specific skills, whose relevance is just judged

differently across cultures.

Cultural differences can be observed in procedures too. Whereas online bidding is in

Western countries a standard procedure conducted by an automaker to purchase components,

it appears that this form of sourcing is in Japan applied to a far lesser extent. A reason might

be that online bidding prevents personal communication, and hence does not contribute to

establish an interpersonal relationship important in the Japanese business system. Other

organisational differences on group and industrial level could be observed. From a German

point of view the lack of inter-functional professional positions in Japan is perceived a barrier

to problem solving. Positions that include commercial as well as engineering responsibilities

(e.g. project management) appear to be rare. This fact can also be viewed in the background

of relation-specific skills that obviously in our case have not resulted in the firms’ adjustment

to the other organisational forms, but rather developed away from each other. This fact

corresponds affirmatively to proposition 3.

On an industry level, it is surprising to see that the traditional Keiretsu organisation

has not really been diluted today. It is still seen as the most significant barrier to acquiring

market share in Japan in the automotive component segment. However, it has to be noted that

the rigid organisation has finally begun to change after Great East Japan Earthquake of March

2011. Japanese automakers found alternative partner and switched from Keiretsu suppliers to

foreign suppliers in order to restart their plants as soon as they could (Nikkei Sangyo Shimbun,

2012; Freescale Semiconductor Japan, 2012; Fujimoto, 2011). We assume that the March

2011 Earthquake was a turning point for many Japanese auto makers to reform their

purchasing policy. As our expert interviews in Japan and Germany took place shortly before

the earthquake, we were not able to explore its effect in relation to supply chain management

issues of Japanese automaker deeper, unfortunately.

Practical implications

This study discovers valuable implications for practice. Among the most remarkable findings

are the following: First, we observe that collaboration does not immediately lead to

convergence of organizational structures. Whereas our case study shows that cross-functional

positions such as project management are common in Germany, we observe in Japan rather a

traditional division of functions in, e.g. engineering, sales, purchasing or quality prevailing.

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For a non-Keiretsu foreign supplier with a different definition of functional job

responsibilities this easily leads to increased transaction cost in a collaborative relationship

and makes decision making proceeding slow. Second, contrary to the general opinion that

Keiretsu structures slowly dilute, we couldn’t find evidence for this claim in the field of

automotive electronics. Here, Keiretsu structures are still strong and represent an entry barrier

to foreign suppliers. On the contrary, suppliers who possess a global production network have

better chances to acquire projects with Japanese automobile maker when competing with

Keiretsu suppliers abroad for overseas production volumes. The latter represents a strategic

move for foreign suppliers that is likely far more promising to be successful than competing

with Keiretsu suppliers on the domestic market.

Limitations

Our findings have to be viewed in the light of the limitations of the study. First, the data

gathered represent rather a small sample. They were gathered among experts representing a

firm that corresponds to Asanuma’s DA-parts category VI only. Data representative of the

other categories would have contributed to a broader view of the influence of trust on the

development of relation-specific skills. Moreover, experts were recruited from one firm only.

As corporate culture varies across firms, it has different influences on managerial behaviour.

Future research would benefit from applying comparative or multi-case analysis by increasing

the number of organisations to be analysed. Nevertheless, the results may stimulate further

inquiry into this subject for future research that is established based on a broader data base.

Conclusion

Asanuma’s concept of relation-specific skills contributed greatly to a better understanding of

the Japanese collaborative business system. Several scholars have referred directly or

indirectly to Asanuma’s work explaining the source of competitive advantage Japanese firms

generated based on the cultivation of relation-specific skills. Though the latter has been

explained in economic terms only, our findings indicate that the establishment of trust

proceeds in different ways across cultures.

Our results suggest that these cultural differences affect the cultivation of relation-

specific skill, and thus need to be considered integral to the concept. Based on the findings,

we propose the hypothesis that cultural homophily (McPherson et al., 2001) positively

influences the cultivation of relation-specific skills. Future research should shed more light on

this assumption. From a practical point of view, managers of Japanese and German firms

16

should expect higher transaction cost as organizational structures seem not to converge over

time, at least not short term. In order to bridge this gap, mutual trust becomes an important

feature to balance transaction cost. Moreover, in the background of continuously strong

Keiretsu structures in Japan in the field of automotive electronics, firms are advised to rather

compete with Japanese suppliers for overseas production volumes of Japanese automaker.

Foreign suppliers who possess a global production footprint do have a competitive advantage

that is more likely to take effect in overseas markets than on the Japanese market itself.

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Tables

Table 1. Classification of parts and suppliers

Parts manufactured according to drawings

provided by the supplier

Parts manufactured according to drawings

provided by the core firm

Criterion for

classification

Example

The core firm

provides

minute in-

structions for

the manufac-

turing process

Small parts

assembled by

firms offering

assembly ser-

vice

The supplier

designs the

manufacturing

process based

on blueprints

of products

provided by

the core firm

Small outer

parts manu-

factured by

firms offering

stamping

service

The core firm

provides only

rough draw-

ings and their

completion is

entrusted to

the supplier

Small plastic

parts used in

dashboard

The core firm

provides

specifications

and has sub-

stantial

knowledge of

the manufac-

turing process

Seat

Intermediate

region be-

tween IV and

V

Brakes,

bearings,

tires

Although the

core firm

issues specifi-

cations it has

only limited

knowledge

concerning

the process

Radios,

electronic fuel

injection

systems,

batterys

The core firm

selects from a

catalog of-

fered by the

supplier

I II III IV V VI VII

Parts offered

by catalog

(“marketed

goods”)

Parts manufactured according to specifications provided by the core firm (“ordered goods”)

Source: Asanuma, 1989

20

Table 2. Interview partner selection

Table 3. Interview logic and instrument

21

Table 4. Anecdotal evidence on the importance of developing interpersonal trust

22

Table 5. Data structure and aggregates along major themes (summary)